CERTAIN INTERNATIONAL MARKETS HAVE A STRONGER NEAR-TERM BACKDROP THAN U.S. MARKETS

 

The team at Day Hagan will be thinking of our clients and friends affected by Hurricane Harvey. Please let us know how we can help.

SELECT TECHNICAL OBSERVATIONS

International Markets: Aided by a weak U.S. Dollar, both relative strength and advance-decline analysis suggest the international technical backdrop is healthier than the U.S. technical backdrop. Chart below.

Domestic Advance-Decline Lines: The single "A-D Line non-confirmation" that occurred in early August remains in effect. Unless a series of non-confirmations occur, the odds favor a trading range over the next four to six weeks, versus a more serious decline. Nonetheless, given the weak seasonal period still in effect, please continue to identify and manage downside risk tolerance levels. Chart below.

S&P 500 (2444.24): Demand for stocks, defined by the percentage of stocks above short-term and long-term moving averages (50-day and 200-day respectively), remains lacking and leaves my near-term tactical view "cautious." Near-term tactical support exists at 2417, followed by "in and around" 2400 and then the rising 200-DMA. Near-term tactical resistance exists between 2455 and 2460, followed by 2475. Chart below.

What will I be watching to discern a renewed desire on the part of Wall Street to buy stocks? An excellent guidepost would be a day where advancing volume is 90% of total advancing and declining volume or two consecutive days in which advancing volume is 80% of total advancing and declining volume. Additionally, a contraction in the number of stocks making new 52-week lows during a period of domestic market weakness would increase the odds that a low has been established. 
Side note: The weak U.S. Dollar has been a headwind for domestic Small Cap stocks. Any near-term strength in the U.S. Dollar could provide a much-needed boost for the Russell 2000. RUT chart below.

Gold: Since early June, I've discussed the importance of resistance at $1300. Specifically, for at least the intermediate-term trend to turn bullish, "a close above resistance 'in and around' $1300 will be necessary in order for a sustainable uptrend to occur." While the chart below wasn't updated at the time of this writing, the precious metal closed at $1315.30 (continuous contract) yesterday. Consistent with this, my intermediate-term opinion is bullish. Chart below, please excuse the typo inside the chart.

Top half of chart: Pring Global Advance - Decline Line. Bottom half of chart: NYSE Common Stock Only Advance - Decline Line. Single breadth divergence as the SPX closed at a new high but the A-D line didn't. 
Vanguard All-World ex-US versus Vanguard Total Stock Market.
S&P 500: 10 month chart with support (in green) and resistance (in red). 
Russell 2000 (RUT) Small Cap Index. The poor absolute and relative price action of Small Caps has been well documented. Consistent with this and from a non-trading perspective, a violation of critical support between 1350 and 1335 would NOT be good!
Gold - Continuous Contract (EOD) 

Have a wonderful start to your week. Please know that Day Hagan Asset Management appreciates your support and hard work!

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 8.28.2017. Chart sources: Stockcharts.com.

Disclosure: The data and analysis contained herein are provided "as is" and without warranty of any kind, either expressed or implied. Day Hagan Asset Management (DHAM), any of its affiliates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Day Hagan Asset Management literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DHAM accounts that DHAM or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. DHAM uses and has historically used various methods to evaluate investments which, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior DHAM recommendations or DHAM performance rankings, one should also consider that DHAM may modify the methods it uses to evaluate investment opportunities from time to time, that model results do not impute or show the compounded adverse effect of transactions costs or management fees or reflect actual investment results, that some model results do not reflect actual historical recommendations, and that investment models are necessarily constructed with the benefit of hindsight. For this and for many other reasons, the performance of DHAM's past recommendations and model results are not a guarantee of future results. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.

Investment advisory services offered through Day Hagan Asset Management, an SEC registered investment advisory firm. Accounts held at Raymond James and Associates, Inc. (member NYSE, SIPC). None of the entities listed here in this disclosure are affiliated.